Sauron knew that Huan would anyway kill the wolves since I believe he knew about the prophecy. He expected that he would be the greatest wolf of all times in his wolf form, however that "honor" belonged to Draugluin.
As for the Valar...I am not sure what to say
I guess many of their deeds seem idiocy, but at a closer look show much wisdom from them. Of course many led to the deaths of thousands, but as long as it was fair it seems the Valar had no problem with it. I personally also don't like their ideas, but I guess it is hard as lesser beings to understand how a spirit of their level would handle.
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“The invisible and the non-existent look very much alike.”
Delos B. McKown
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